COMMERCIAL PROPERTY OWNERS and tenants are often unaware they are entitled to claim deductions for the depreciation of many of the assets installed during the fit-out of a commercial property.

These deductions are important, as depreciation is a valuable source of hidden cash flow that will not only lower the burden of fit-out costs, but also assist with ongoing business expenses. [Read more…]

AS YOU WILL APPRECIATE, there is a fair amount of information you need to know about Commercial property. Although fundamentally, all that rests upon just six Pillars.

Once you understand that, everything else starts to make a lot more refrainsense.

So, let’s perhaps take a few moments to briefly explore those Pillars.

1. Ensure your Principal is Safe

You see, most investors appear to be mesmerised by “return ON capital”. And of course, that’s important – because it’s probably the main reason you are investing in Commercial property in the first place.

Simply chasing extra income (or growth potential), while possibly putting your hard-earned equity at risk … is not very smart. Therefore, with any investment, your first consideration (as an absolute minimum) … is being satisfied that your initial equity will be returned, when you finally sell.

And if your gut tells you that could be in doubt … then, simply don’t proceed – no matter how appealing the Commercial property may be.

2. Control your Liabilities

There are two schools of thought, but my preference would be to fix your interest rate when borrowing.

Sure, it may cost you an extra 0.5% per annum … but that is tax-deductible and most importantly, you get to sleep at night.

The other suggestion would be to avoid personal guarantees wherever possible – by only borrowing on a non-recourse basis. That will probably limit you to a 65% loan-to-value ratio. But it also helps to reduce your overall exposure.

3. Always Seek to Add Value

Merely buying a property at market value and sitting on it, means your only source of growth is through inflation, or the automatic annual rent increases.

Throughout the period of your ownership, you need to think creatively. Simple things (like a cosmetic upgrade 12 months before a market rent review) could help you extract additional rental, when the review actually takes place.

If the property is reasonably large, you may have the opportunity to subdivide it into one or more smaller titles. This alone can add up to 10% to the value of the property, with minimal outlay on your part.

4. Property is Long Term

As you already know, I recommend a 4-year mandatory review of your Commercial property. However, that doesn’t necessarily mean that you should sell it.

The important thing is that you make a formal decision to retain ownership – based upon the remaining period of the lease, the current Commercial property market and where you are in the economic cycle.

Ideally, the plan is to hold the property for 10 years or more. And that will give you the opportunity to add value; plus you can also use it as collateral to periodically release equity, and acquire further Commercial properties.

5. Never Become Complacent

You need to realise that it only takes one mishap to go broke. Therefore, you should seek to fully protect your property that all times – constantly keeping an eye on the market, while you actively looking to add value.

And also, ensure you maintain your property in ready-to-sell condition.

6. Your Tenants are your Partners

Always be responsive to their requests – and make that clear to your managing agent as well.

Plus, it’s important for you to try and anticipate their needs – because that will create a more-responsive frame of mind, when rent-review time comes around.

Bottom Line: As you can see, none of this is exactly moon-landing stuff – it’s basically all just commonsense.

However, I can’t tell you how many would-be investors fail to observe these six Pillars; and end up with poorly performing Commercial properties as a result.

Anyway, if you’d like to explore this further … simply click on the eBook image on the right, to download this short report.

THE FINANCIAL INDUSTRY in general (and the major banks in particular) have been under the microscope recently as a result of the Royal Commission. And that has provided a steady stream of negative headlines for the banks over the past 12 months.

As a result, the banks have instituted a number of changes including: [Read more…]

DOES THE IDEA OF BUYING commercial property instead of renting your current business premises appeal to you? Or are you undecided whether to purchase a commercial investment over a residential property for your portfolio?[Read more…]

AS OF 1 OCTOBER 2018, Victoria has moved one step closer to a completely digital conveyancing process as all property settlements (with some exceptions) are required to be completed via PEXA (Property Exchange Australia). [Read more…]

AS OF 1 JANUARY 2017, Victorian land owned by an “absentee owner” is subject to an additional 1.5% Absentee Owner Surcharge. The purpose of the surcharge is to require foreign buyers, who do not pay other taxes, to contribute to government services and infrastructure in Victoria.

Although this surcharge also applies to commercial property, it was originally introduced as an attempt to manage foreign purchasing of residential real estate in Victoria – to assist with housing affordability. [Read more…]

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